Samsung is on track for record profits and is widely expected to pass Intel Corp as the world's top chipmaker by sales in 2017 on the back of a memory market boom. — Reuters
SEOUL: Samsung Electronics Co Ltd said a memory chip boom that propelled it to record profit in the second quarter is likely to continue in the third, just as revenue is widely expected to benefit from sales of OLED screens to Apple Inc.
The world’s biggest maker of memory chips, smartphones and TVs is set to smash its annual profit record after better-than-forecast performance in its mobile business lifted April-June profit slightly above its early-July guidance, analysts said.
“Looking ahead to the third quarter, the company expects favourable semiconductor conditions to continue,” Samsung said in a statement on Thursday. ”Although overall earnings may slightly decline quarter-on-quarter as earnings weaken for the display panel and mobile businesses.”
Memory chip makers are enjoying a so-called super-cycle where increasing demand for more sophisticated devices, such as cloud-computing data centre servers, requires higher numbers of more expensive chips. That has brought about a supply shortage which is pushing prices even higher and widening profit margins.
Chips were Samsung’s top earner in the three months through more than tripling from the same period a year earlier to a record 8 trillion won (US$7.20 billion). Continued demand for DRAM and NAND chips and supply constraints are likely to sustain profit margins for the foreseeable future, Samsung said.
SHARE BUYBACK
Overall, Samsung in a filing said operating profit rose 72.7% to 14.1 trillion won in the second quarter, versus 14 trillion won estimated in July. Revenue rose 19.8% to 61 trillion won, also in line with its earlier estimate.
It also announced its third share buyback of the year - 1.7 trillion won worth of common shares - as part of a planned annual total of 9.3 trillion won, and said it would cancel shares worth 2 trillion won.
Samsung’s share price closed down 0.1%, versus a 0.4% rise in the Kospi benchmark index.
WEAKER MOBILE
In its mobile division, Asia’s third most valuable company by market value reported 4.7% fall in profit, slightly milder than the decline forecast in early July.
Mobile chief Koh Dong-jin this month said cumulative sales of new flagship Galaxy S8 and S8+ smartphones, released April, were 15% higher than those of its predecessor.
However, the firm expects mobile earnings to dip in the third quarter as S8 sales trail off, mid- to low-tier models take up a larger share of total shipments, and marketing costs increase for the Galaxy Note 8, unveiled on Aug 23 in New York.
“The mobile business might be slightly weaker in the third quarter because the second quarter was so strong,” said analyst Greg Roh at HMC Investment & Securities. ”But the expected sales from OLED display supply to Apple is seen to be reflected in earnings starting in the third quarter.”
APPLE OLED
Apple is widely tipped to adopt Samsung’s organic light-emitting diode (OLED) display for the next iPhone expected in the second half of the year.
Subsidiary Samsung Display Co Ltd has an over 90% market share in smartphone OLED screens.
However, price competition in liquid-crystal displays (LCD) used in low- and mid-tier handsets is expected to cut margins.
Samsung’s record earning come as the firm’s vice-chairman Jay Y. Lee is in detention while on trial for his alleged role in a corruption scandal involving South Korea’s former president Park Geun-hye. He has denied wrongdoing.
The lower court ruling on the case is likely to come before Lee’s current detention period ends on Aug 27, a Seoul court spokesman said. - Reuters
Win a prize this Mother's Day by subscribing to our annual plan now! T&C applies.
